Medline Settles False Claims Act Allegations for $85 Million In Spite of Government’s Failure to Intervene

Medline Industries, Inc. and its affiliated charitable foundation, The Medline Foundation, have just settled a whistleblower action brought by Sean Mason, a former employee, for $85 million. Mason alleged that Medline violated the False Claims Act by giving kickbacks to hospitals and other healthcare providers that purchase medical products under Medicare and Medicaid. Medline Industries is a major producer of medical products and equipment. Mason alleged that Medline gave kickbacks to companies such as HCA Inc. and HealthSouth Corporation in the form of improper discounts, rebates, loans, impermissible charitable donations and other forms of unlawful remuneration.

What makes this case somewhat unusual is that the federal government had declined to intervene in the lawsuit prior to the settlement. By filing this as a qui tam action, Mason stood in the shoes of the U.S. government, which failed to exercise its right to intervene and take control of the litigation. This is one of the largest settlements of a False Claims Act case where the government did not intervene.

Under the terms of the settlement agreement (which is available here), Medline agreed to pay $85 million to the federal government and $6 million in legal fees to the whistleblower’s attorneys. For his part, Mason, the whistleblower, will receive $23,375,000.

In the settlement agreement, Medline made no admission of wrongdoing. Indeed, Medline has since issued a press release denying Mason’s allegations and pointing out that “[t]here were no allegations that Medline caused financial harm to [its] customers or that any government programs paid more for [its] products.” Medline justified its decision to settle based on its desire “to avoid the costs and burden of prolonged civil litigation.”

This post was contributed by Kurt E. Bratten.


Kurt Bratten

About Kurt Bratten

Kurt Bratten is Partner in our Health Law Department. His practice includes a wide range of civil litigation, transactional work and compliance and other advisory services. Kurt’s primary focus is counseling health care providers regarding compliance and transactional matters including managed care contracting, HIPAA and other confidentiality rules, anti-kickback and self-referral requirements, and other provider group-specific state and federal regulations.